PSALM rejects SPPC offer for Ilijan plant

By Bernadette D. Nicolas – February 25, 2021
from Business Mirror

The Ilijan Power Plant sits on a 60-acre site at Arenas Point, Barangay Ilijan, Batangas City.

State-run Power Sector Assets and Liabilities Management Corp. (PSALM) rejected the “new” and “preposterous” condition imposed by South Premiere Power Corp. (SPPC) tied with its offer to fully advance its monthly payments for the Ilijan Power Plant.

The Department of Finance (DOF) disclosed this on Wednesday, saying San Miguel Corp.’s power unit demanding that PSALM “cede control and ownership of Ilijan Power Plant” upon SPPC’s full settlement of its monthly dues, and even ahead of the June 2022 turnover date provided in the Independent Power Producer Administrator (IPPA) Agreement.

In a business review of PSALM with the DOF on January 19, PSALM President and CEO Irene Besido-Garcia reported to Finance Secretary Carlos G. Dominguez III that SPPC’s offer now carries with it a new condition that “entirely differs from the tenor of SPPC’s original offer” last year. She also said SPPC’s latest offer was outlined in a letter dated January 11, 2021 and sent by the SPPC General Manager Elenita Go.

Garcia also informed DOF that PSALM sent a response to SPPC dated January 18 wherein it said the new condition will “preempt any ruling of the judicial court on the matter and will undoubtedly prejudice PSALM’s legal position.”

Moreover, PSALM reminded SPPC that it is “willing to accept SPPC’s offer, provided that such acceptance is without prejudice to PSALM’s legal position” in the pending case.

Dominguez also told PSALM about the latest directive of President Duterte not to allow any private company to benefit or to secure a franchise until “they settle their full accounts with the government.”

Based on PSALM’s data, the monthly payments due from SPPC for January 2021 until June 2022 is about P14 billion. When the offer was made by SPPC early last year, the monthly payments reached about P22.68 billion.

Further, PSALM also stressed in its response to SPPC that the National Power Corp. (Napocor), and KEPCO Ilijan Corp. (KEILCO) — the independent power producer of the Ilijan Power Plant—had already agreed on the specific transfer date of the power plant. It added that it should not be obligated to fast-track or amend its current arrangements in the Energy Conversion Agreement (ECA) under another contract with a different party in order to accept SPPC’s offer.

Besido-Garcia recalled there was no demand to deliver the Ilijan Power Plant ahead of schedule when SPPC announced the prepayment offer in 2020 since SPPC said the offer was meant to help PSALM.

Garcia explained that in the March 6, 2020 offer of SPPC to PSALM, the only condition imposed by SPPC on the advance settlement of its monthly payments to PSALM was that it would be without prejudice to SPPC’s legal position with respect to the ongoing dispute with PSALM on the generation payments due under the IPPA Agreement.

SPPC, a subsidiary of SMC Global Power Holdings Corp., also still owes PSALM P23.07 billion in generation payments as of the end of December 2020 per PSALM’s books. The computation of generation payments due PSALM from SPPC is the subject of the pending court case, stemming from differences in computing generation charges.

Generation payments refer to the cost of energy based on the specific formula provided for in the IPPA Agreement, while monthly payments refer to the fixed monthly amounts due to PSALM based on the IPPA’s financial bid for its right to own the power plant at the end of the IPPA Agreement.  According to its original IPPA contract, as payment for its right to market the capacity from the power plant, SPPC is supposed to pay PSALM fixed monthly payments up to June 2022. SMC, through SPPC, originally won the bidding for the Ilijan plant for $870 million.

By the time the contract ends in 2022, SPPC would have paid P392 billion for the Ilijan plant, more than double its bid price, broken into P97.5 billion in fixed monthly capacity fees, and P294.7 billion in generation fees.

The Ilijan Power Plant in Batangas City was constructed and owned by KEILCO under the ECA with Napocor/PSALM. SPPC was appointed the IPP Administrator for the Ilijan Power Plant in 2010.

Image credits: www.san miguel.com.ph